Which of the Following Statements Is Correct with Respect to the §

question 11

Multiple Choice

Which of the following statements is correct with respect to the § 338 election?

• A)The parent corporation makes the § 338 election.
• B)A qualified stock purchase occurs when a corporation acquires, in a taxable transaction, at least 80% of the stock (voting power and value) of another corporation within a 18-month period.
• C)The subsidiary corporation must be liquidated pursuant to the § 338 election.
• D)Gain, but not loss, is recognized by the subsidiary as a result of a deemed sale of its assets.
• E)None of the above.

---

Definitions:

Fixed Manufacturing Overhead

Indirect manufacturing costs that do not change with the level of production, such as salaries of managers and depreciation of factory equipment.

Estimated Labor-Hours

A projection of the total hours of work required to complete a task or project.

Variable Manufacturing Overhead

The indirect, variable costs associated with manufacturing a product, which change in proportion to production volume.

Fixed Manufacturing Overhead

Refers to the regular, consistent expenses incurred in the operation of a manufacturing facility that do not vary with production volume, including salaries of permanent staff, rent, and insurance.